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Deficit Spending.

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Macro Economics
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American Military University
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Running head: DEFICIT SPENDING 1
Deficit Spending
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DEFICIT SPENDING 2
Deficit Spending
Deficit spending is an important microeconomic model applied by various
governments and institutions. Deficit spending is defined as the aspect of governments’
expenditure that exceeds the corporate taxes and federal revenue at a given period of time. As
a result, deficit financing increases governmental debt rate to a significant extent. Most
economists argue that deficit financing is a desirable economic factor. For example, John
Maynard Keynes provides that deficit spending plays a significant role of moderating a
countries economic status during a recession period. Nonetheless, deficit spending has
various advantages and disadvantages.
Advantages
Notably, deficit spending has various advantages when applied by the government.
Firstly, deficit spending has a positive impact on the growth of an economy. In most cases,
governments seek to apply deficit spending strategies to foster the development of their
countries. For example, they borrow money to conduct the development of infrastructure.
Importantly, developing the infrastructure increases employment opportunities significantly.
Adding more people into the labor force increases the number of contributors to the GDP of a
country. On the other hand, using deficit spending in development makes a country attractive
to local and foreign investors (Chrystal & Thornton, 1988). Having more investors in the
country creates more employment opportunities. Also, investors generate a positive impact
on revenue and the growth rate of an economy. As a result, deficit spending is the way to go
in an economic recession period.
Secondly, deficit spending forces governments to develop mechanisms with the aim
of controlling government expenditure. In most cases, deficit program loans are subjected to
high-interest rates. As a result, a government will employ strict measures to control its
spending. For example, governments are forced to spend loans on projects with long-term

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Running head: DEFICIT SPENDING 1 Deficit Spending Name Institutional Affiliation DEFICIT SPENDING 2 Deficit Spending Deficit spending is an important microeconomic model applied by various governments and institutions. Deficit spending is defined as the aspect of governments’ expenditure that exceeds the corporate taxes and federal revenue at a given period of time. As a result, deficit financing increases governmental debt rate to a significant extent. Most economists argue that deficit financing is a desirable economic factor. For example, John Maynard Keynes provides that deficit spending plays a significant role of moderating a countries economic status during a recession period. Nonetheless, deficit spending has various advantages and disadvantages. Advantages Notably, deficit spending has various advantages when applied by the government. Firstly, deficit spending has a positive impact on the growth of an economy. In most cases, governments seek to apply deficit spending strategies to foster the development of their countries. For example, they borrow money to conduct the development of infrastructure. Importantly, developing the infrastructure increases employment opportunities significantly. Adding more people into the labor force increases the number of contributors to the GDP of a country. On the other hand, using deficit spending in development makes a country attractive to local and foreign investors (Chrystal & Thornton, 1988). Having more investors in th ...
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